In line with their deregulatory agenda and aim of shifting towards a more business-friendly employment framework, the Coalition Government has supported ACT MP Laura McClure’s Termination of Employment by Agreement Bill to the select committee stage.
The bill is one of a raft of proposed amendments which align with the broader Coalition Government’s objective of streamlining labour laws, but which have the effect of significantly diminishing workers' rights.
In its current form, the bill would allow employers to make an offer to an employee to terminate their employment by “mutual consent” in exchange for specified compensation, irrespective of whether there are any grounds or even apparent issues in the employment relationship.
Whilst promoted as a useful tool for both employers and employees, in reality, such an amendment would tip the balance of power further in favour of employers.
This bill would protect employers who partake in such pre-termination negotiations, rendering these discussions generally inadmissible in any subsequent legal challenge.
Essentially, the law change would allow employers to terminate at will, without consequence, provided they pay the “pre agreed” price.
Under current law, parties are not prevented from reaching an agreement that an employee’s employment will end, however there are tight rules around when and how such discussions can occur. The primary prerequisite is that there is an acknowledged employment relationship problem between the parties, and mutual agreement to explore options for resolution on a “without prejudice” basis.
Plus, as rightly pointed out by the New Zealand Council of Trade Unions, employers and employees currently have the option to attend mediation to resolve issues, which is without prejudice and inadmissible.
The status quo is that a proposal to end an employee’s employment without an existing employment relationship problem would likely give rise to grounds for a constructive dismissal personal grievance or would otherwise jeopardise any formal processes subsequently initiated by the employer.
Consequently, removing such a requirement would result in no restrictions or criteria on when an employer could terminate employment, placing employees in a constantly uncertain position and potentially at risk of exploitation.
Little comfort for employees can be drawn from the few protections that are afforded by the amendment. For instance, the amendment suggests that negotiations conducted for a “dishonest purpose” will not be protected, but, in practice, establishing “dishonesty” in this context will be very difficult. Further the onus will be on the employee to prove it.
For example, would it be considered a dishonest purpose for an employer to buy an employee’s termination when they have made a complaint about their employer and to avoid having to deal with it?
Such a purpose would seem to align with the Explanatory note of the bill which says that termination might occur if, for example, “the demands of the business mean that is imperative to dismiss the employee”. This is an extraordinarily broad statement and could cover virtually any situation.
Ultimately, the amendment would create an anomalous provision within the Act, operating contrary to the stated purpose of the legislation, including to promote and maintain good faith employment relationships.
Therefore, unsurprisingly, the proposed amendment appears to leak when pricked lightly. This is likely to be because many of the assumptions and views upon which the bill is based are ill-founded.
Laura McClure has backed the bill on the basis that "some employers would happily offer an employee money to leave, and in many cases the employee would happily accept. But this is not an option under current law”.
This statement is incorrect. The existing law allows parties to an employment relationship to mutually agree on the terms of an exit, but it also includes certain protections. Specifically, there must be an employment relationship problem, and both parties must agree to explore resolution on a "without prejudice" basis.
Currently, therefore, an employee has the right to decline to engage in a discussion of this nature and can seek advice as to their available options, including the strength of any potential legal claims. This situation is very different from being forced to accept an arrangement predetermined at the start of employment, and which can then be held over them throughout their tenure.
McClure has also expressed that there is “no way an employee can be coerced into even having this conversation in the first place”.
This is also incorrect, as employees are commonly pressured into having these exit discussions, but under current law, they have protections if this occurs.
Ultimately, McClure’s view is that the “bill is about having those mutual conversations that we know two parties are grown up enough to be able to sit down and have”.
I have previously described the earlier iteration of this bill as a wolf in sheep’s clothing. I now see sharp teeth.
Behind the language of "mutual consent" lies a mechanism that legitimises coercion, cloaked in civility. Let’s call this bill what it truly is, a quiet dismantling of worker protections, disguised as grown-up conversation.
Originally published in The Post
